Executive Travel : Straight-Fee Travel Agent Approach Is Catching On : Consumers: Trend could put an end to commissions. ‘It’s time for a revolution,’ exec says.

From Bloomberg Business News

If you want to buy an airline ticket and get a cash rebate to go with it, call Travel Avenue.

The Chicago agency can save you $20 off the price of a $500 flight--not because it has any special clout but because it passes some of its $50 commission from the airline on to customers.

Travel Avenue is part of a trend, initiated by large corporate firms and spreading to small-business and leisure consumers, that could eventually mean the near-elimination of travel agent commissions in the United States.

“It’s time for a revolution in pricing,” said Ivan Schaeffer, president and chief executive of Bethesda, Md.-based Woodside Travel Trust, a partnership running about 3,600 travel offices worldwide.


He said the current system, in which agents get commissions from airline, hotel, rental car and cruise ship companies, isn’t fair because agents aren’t compelled to sell the lowest-cost travel arrangements. Rather, he said, they have every incentive to sell higher-priced products because that increases their income.

Schaeffer wants agents to charge customers a fee for the service they provide in issuing tickets and arranging travel plans. In this way, they will work for the customer--not for the airlines, hoteliers and rental car companies.

The stakes are big: Travel agents book 85% of all airline tickets sold, about 50% of rental cars and 30% of domestic hotel rooms. In return, they get commissions of 10% to 15% of ticket prices and room rates.

So far, fee-for-service travel plans haven’t come close to eliminating commissions, but they have become widespread in the business world, said Mike Billig, publisher of Business Travel Management magazine. All of the biggest travel agency networks--including Woodside Travel, American Express Co. and Carlson Wagonlit Travel--and most of the Fortune 500 companies have adopted the plans in the last six years, he said.


Travel agencies were powerless to resist such arrangements, because corporate travel offices were going direct to the airlines and rental car companies in pursuit of volume discounts, said Earl Foster, Hewlett-Packard’s travel operations manager. Fee service has grown as agencies became worried they might be left out.

Some, including Travel Avenue, and Stamford, Conn.-based CUC International Inc. are providing fee-for-service type plans to leisure travelers, though such plans have made little progress with the general public.

Agents will resist the elimination of commissions until the corporations and airlines can guarantee them a profit, Hewlett-Packard’s Foster said.

Others will fight it too. Hilton Hotels Corp. says it uses commissions as a means of getting travel agents to steer customers toward its rooms.